The “Steward-owned Company” – from idea to draft-bill

In mid-June 2020, an academic working group presented a “Draft Bill for a Steward-owned Limited Liability Company”. The purpose of the draft is to create a new variant of the legal form of the German limited liability company to provide a legal framework for steward-owned companies. In this context, “steward-ownership” means a special form of company ownership that is characterised by the fact that even though the owners have managerial power over their company, they do not have access to the company’s profits and the assets tied up in it.


It is by no means a new idea that it is possible to separate entrepreneurial activities from the – legitimate – purpose of maximising profits as a goal in itself, and then to replace this purpose with a meaningful and value-oriented long-term company purpose that is largely characterised by the fact that the company’s assets cannot be privatised. The technology company “Zeiss”, which was established by Carl Zeiss in 1846, is considered to be one of the earliest examples of steward-ownership. After Zeiss died in 1888, the co-owner Ernst Abbe established the Carl Zeiss Foundation, donating the entire business to the foundation. To this day, the Carl Zeiss Foundation has ensured that the business cannot be sold and that all the profits it generates are either reinvested or used for the common good.

Today, approximately 200 German companies are steward-owned; in addition to Zeiss, these include, for example, Bosch, ZF Friedrichshafen, Alnatura and Elobau, but also start-ups such as Ecosia, Einhorn and Startnext. Companies that are dedicated to a particular purpose in the manner described above also exist, of course, in other jurisdictions; examples include the pharmaceuticals company Novo Nordisk (Denmark), the John Lewis department store chain (United Kingdom) and the internet company Mozilla (United States). In Denmark, steward-owned companies are said to account for 60% of the Danish stock index.

Steward-owned companies generally operate for profit in the market, even if they are often committed to promoting the common good. Establishing a steward-owned company, or introducing steward-ownership in a company that already exists, is, however, a complex and very costly process, notably in Germany. The implementation of this form of ownership currently requires foundations and companies that have very sophisticated legal and tax structures. Especially where solutions involve a foundation, this may give rise to significant difficulties, rooted in foundation law and in the supervision of foundations, as well as in the provisions of tax law regarding public-benefit purposes.

There is, however, a growing need for a legal form that is comparatively easy to handle and can be applied to steward-owned companies. A growing number of companies that manage both well-established family businesses and recently established start-ups would like to ensure the independence and continued existence of their businesses for the purposes of sustainable value-adding activities and, to this end, would like to transform their businesses into steward-owned companies.

It has remained open up to now whether the steward-owned company as a separate type requires an entirely new legal form or whether an existing legal form should be used as a basis for developing a (mere) new variety.

The Draft Bill

The authors of the draft bill that has now been presented to the public have opted for implementing the idea of steward-ownership by introducing a new variety of the legal form of limited liability company under German law (GmbH). They have pointed out that due to the close connection to GmbH law, many corporate law issues of a general nature will be able to be resolved using proven instruments. Consequently, in their opinion, steward-ownership can be introduced with only a minimum of legal provisions within the existing system of GmbH law.

The newly presented steward-owned limited liability company(GmbH in Verantwortungseigentum – “VE-GmbH”) is characterised by two principles:

  • Firstly, the company’s assets and all the business profits generated should be permanently locked within the company (“asset lock”). This has to be ensured by means of suitable governance rules. It is not intended that a commitment to a sustainable purpose that promotes the common good to a particular extent will be required.
  • Secondly, it should be possible to pass on the stewardship, i.e. the responsibility for the business, from shareholder to shareholder regardless of genetic family ties and wealth within a close circle of shareholders (the so-called skill- and value-based family) who make a practical contribution to the undertaking as “trustees”.

According to the draft bill, Sections 77a to 77o are to be inserted as a new Part into the German Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung - “GmbHG”). A central rule is to permanently bind the company’s assets by way of the irrevocable asset lock, which means that the shareholders are not entitled to the company’s profits or assets throughout the life cycle of the business. To this end, adjustments have been made to the provisions governing the financial constitution, with a particular focus on the provisions aimed at preventing hidden distributions of profits. Other provisions that are just as important relate to the characteristics and selection of the shareholders as a “skill- and value-based family”. The draft bill limits the circle of potential shareholders, restricts the transferability of shares and allows the shareholders to exclude the transferability of shares by succession.

The following quote from the fundamental Section 77a GmbHG Draft Bill may illustrate these points:

“Section 77a

Steward-owned Company

  1. A company whose assets are permanently locked in accordance with the provisions set out in this Part must, unlike as set out in Section 4, include the addition “in Verantwortungseigentum” (i.e. “steward-owned”) in its company name, or an abbreviation of this addition that is generally understood.
  2. The permanent asset lock can be agreed either when incorporating the company or by a resolution passed by all of the shareholders and officially recorded by a notary in accordance with the provisions set out in Part 3. Such an asset lock cannot be cancelled or amended.
  3. Only natural persons, other steward-owned companies or legal entities whose assets are permanently locked by law in the same manner can be shareholders.  The articles of association may additionally provide that also partnerships with only natural persons as partners can be shareholders of the company. If a shareholder does not meet the requirements set out in sentences 1 and 2 despite the setting of a reasonable deadline, such shareholder’s shares shall revert to the company upon expiry of the deadline. (…).”


As the mandatory asset lock leads to a structural change in the incentives for the parties involved, a suitable governance structure is required which must especially ensure that if any shareholders develop an interest in monetary incentives, they cannot secretly circumvent the asset lock. The draft bill gives the owners the liberty to develop governance solutions that are appropriate to their situation; these solutions must, however, be made transparent by being published on the internet!

The shareholders are, however, not obliged to commit to a purpose that promotes the common good, as the steward-owned company is “not a hallmark of especially valuable entrepreneurship”.

The “package” is completed by adjustments to the applicable transformation law and law relating to groups of companies. These adjustments are intended to ensure that the permanent asset lock cannot be circumvented through transformations or intercompany agreements.

Finally, the draft bill contains a few short provisions regarding adjustments to tax laws and regulations, which all follow the approach that the steward-owned limited liability company and related transactions should be taxed in the same manner as a “normal” limited liability company under German law. This means that there are no plans to grant steward-owned limited liability companies any tax privileges.


The above-discussed draft bill is based on a socio-political initiative and discussion that is very interesting and reasonable, in the opinion of the author of this post, even if it is still relatively new. It comes as no surprise then that some of the statements that have been contributed to this debate up until now tend towards idealistically exaggerating this topic – which does, however, seem to be a legitimate thing to do when it comes to promoting an idea. The initiators have thus been able to win the support of a number of well-known businesspeople and important political figures for their project within a short period of time.

As could be expected, the authors of the draft bill have taken a sober, professional and academic approach to legally implementing the initiative. Hopefully their draft will now be discussed and critically assessed by a community of legal experts, as such an academic legal debate is essential for ensuring that the German parliament will, in the end (but probably not very quickly), adopt a “good law”.

Dr Carsten E. Beisheim

Dr Carsten E. Beisheim
+49 211 5660 18728